Search form

Capitalism’s Triumph

‘Entrepreneurial capitalism takes more people out of
poverty than aid.” That statement came not from a tea-party
leader or a congressional Republican, but from Bono, singer,
celebrity, and global anti-poverty activist, speaking to
Georgetown’s Global Social Enterprise Initiative last
year.

As we mark the second anniversary of Occupy Wall Street this
week, it is worth recalling just how much Bono is right and OWS, at
its anti-capitalist core, is deeply and profoundly wrong.

Occupy Wall Street did have a point when it took to criticizing
the crony capitalism that helped precipitate the economic crisis of
2008 and the recession that followed. But that unholy alliance of
Big Business and Big Government, a dog’s breakfast of
regulation, guarantees, and bailouts, has nothing in common with
free markets and entrepreneurial capitalism.

OWS was and remains hostile to the very idea of capitalism.
“Capitalism is tyrannical, exploitative and dehumanizing;
it’s intolerable … Capitalism IS the
problem,” proclaims the main OWS
website.

Yet capitalism has done more to empower people and raise living
standards than any other force in history.

Throughout most of human history, nearly everyone was poor. Even
our wealthiest ancestors enjoyed lower standards of living than
ordinary people in America today. It was not until the beginning of
the 19th century that the masses started to enjoy real and growing
prosperity.

What was the difference? Capitalism and its offspring, the
Industrial Revolution. As Charles Murray explains, “everywhere that capitalism
subsequently took hold, national wealth began to increase and
poverty began to fall. Everywhere that capitalism didn’t take
hold, people remained impoverished. Everywhere that capitalism has
been rejected since then, poverty has increased.”

The transformation occurred first in the West, which was
quickest to embrace capitalism, but is spreading now to the rest of
the world. In the last 20 years, for instance, capitalism has
lifted more than a billion people worldwide out of poverty, while
the share of people in developing countries living on less than
$1.25 a day has been cut in half. In China alone, 680 million
people have been rescued from poverty, and the extreme-poverty rate
has gone from 84 percent in 1980 to less than 10 percent today. In
Africa, inflation-adjusted per capita incomes rose by an
astonishing 97 percent between 1999 and 2010. Hunger in India
shrank by 90 percent after the country replaced 40 years’
worth of socialist stagnation with capitalist reforms in 1991.

One can simply look at the difference between countries that
embrace free-market capitalism, to varying degrees, and those with
rigid state-controlled economies. Recall the classic comparisons
between East and West Germany before the Wall fell, or now, between
North and South Korea.

But perhaps more telling than such extreme examples is the fact
that countries in the top quartile of the Cato Institute’s
annual Economic Freedom of
the World Index had an average per capita GDP of $31,501 in
2009, compared with $4,545 for those nations in the bottom
quartile. The poorest 10 percent of the population in the
most economically free nations had an income more than twice the
average income in the least economically free nations.

Milton Friedman points out that “the only cases in which
the masses have escaped from … grinding poverty … in recorded
history are where they have had capitalism and largely free trade.
If you want to know where the masses are worst off, it’s
exactly in the kind of societies that depart from that.”

This shouldn’t surprise anyone outside of OWS or the Obama
administration. It is capitalism that unleashes and incentivizes
innovation, creativity, and discovery. People become rich by
providing goods and services that are desired by others. And those
who devise new or better goods and services are likely to become
richer faster. A third of the wealthy “1 percent” in
America are entrepreneurs or managers of nonfinancial businesses.
Nearly 16 percent are doctors or other medical professionals.
Lawyers made up slightly more than 8 percent, and engineers,
scientists, and computer professionals another 6.6 percent. These
capitalists don’t just create wealth; they provide us with
the goods and services that make our lives longer, better, and more
comfortable.

And capitalism doesn’t just produce wealth, it creates
opportunity. In a capitalist system, an individual’s future
is not fixed by caste or hereditary social status. Consider that 80
percent of American millionaires are from the first generation of
their family to obtain such wealth.

In fact, many of the earliest critics of capitalism disdained it
because it allowed merchants and others to rise above what was
considered their natural station. Capitalism threatened the old
social order. And it still does so today. Race, religion, gender,
and sexual orientation are irrelevant, enabling individuals to rise
above social attitudes and historical discrimination. To cite just
one example, despite America’s deplorable history of slavery
and racism, there are at least 35,000 African-American millionaires
today.

And finally, it is important to remember that capitalism is
based on voluntary interaction and exchange. It is the antithesis
of force and violence. Systems based on “spreading the wealth
around” inevitably must impose themselves on at least some
people. If I dislike Corporation X for some reason, if I think they
make lousy products, or are poor corporate citizens, or whatever, I
can refuse to deal with them. Try telling that to the IRS.

Certainly this country, like much of the world, has been through
a tough few years. But if we want to once again set our feet on the
path to growth and prosperity, we would be better off listening to
a bit more Bono and a bit less Occupy Wall Street.